Marx begins, here, to sum up these different aspects of Ricardo's theory of profit and accumulation, and from it his erroneous theory of the falling rate of profit, and of crisis that flows from it. Ricardo's theory of the falling rate of profit is really a theory of profit squeeze, and a falling rate of surplus value that ultimately results in a falling mass of profit, and a resultant crisis. The profit squeeze arises from two causes. Firstly, as described above, accumulation leads to labour supplies being diminished. Competition between firms pushes up wages so profits are squeezed. Workers then use these higher wages to have larger families, and more of their children survive. The supply of workers then rises, but all these additional workers must be fed. The demand for food and other agricultural products rises. Less fertile soil must be brought into use. So, the price of food rises, and even though wages have risen, and the prices of other wage goods may have fallen, workers cannot buy the same quantity of food as before, so living standards fall. In the meantime, these higher agricultural prices cause rents to rise, and this means that profits are reduced, from a second front.
As Marx puts it,
“According to Ricardo’s theory of rent, the rate of profit has a tendency to fall, as a result of the accumulation of capital and the growth of the population, because the necessary means of subsistence rise in value, or agriculture becomes less productive. Consequently accumulation has the tendency to check accumulation, and the law of the falling rate of profit—since agriculture becomes relatively less productive as industry develops—hangs ominously over bourgeois production. On the other hand, Adam Smith regarded the falling rate of profit with satisfaction. Holland is his model. It compels most capitalists, except the largest ones, to employ their capital in industry, instead of living on interest and is thus a spur to production. The dread of this pernicious tendency assumes tragic-comic forms among Ricardo’s disciples.” (p 541)
The same tragi-comic forms can be found amongst those today who purvey a catastrophist theory of crisis, and collapse on the basis of a theory of the law of the tendency for the rate of profit to fall. In the process, those that argue this catastrophist theory provide what is actually a Ricardian version of crisis, with all of its implications, rather than a Marxian version, which was set up in opposition to it. Marx quotes at length on this subject from Ricardo's Chapter V, On Wages. In these quotes, Ricardo says that, in various stages of society, capital accumulates at a faster or slower pace. But, a hint of Physiocracy still affects Ricardo's ideas, here, reflecting the time he was writing. A determining factor in this accumulation, Ricardo says, is the productivity of labour. However, he continues,
“"The productive powers of labour are generally greatest when there is an abundance of fertile land: at such periods accumulation is often so rapid, that labourers cannot be supplied with the same rapidity as capital” (l.c., p. 92).” (p 541)
And, of course, this is central to his theory of the falling rate of profit and crisis. He goes on to describe the way in favourable conditions, population may double every 25 years, but that capital would double in a much shorter time than that. Marx comes back to this argument in Chapter 21, examining the work of Hodgskin
“In that case, wages during the whole period would have a tendency to rise, because the demand for labour would increase still faster than the supply.” (p 541)
He then goes on to describe the consequences of this in the colonies, such as the US, Canada, Australia etc. “where the arts and knowledge of countries far advanced in refinement are introduced, it is probable that capital has a tendency to increase faster than mankind: and if the deficiency of labourers were not supplied by more populous countries, this tendency would very much raise the price of labour.” (p 541)
There is a modern echo of this in the facile arguments put forward by right-wing populists such as Trump, UKIP, the Tories, Le Pen, Wilders and so on. Their argument is that wages of domestic workers are suppressed as a result of immigrant labour being used to increase the supply of labour-power. In fact, the argument is wrong for several reasons. Firstly, Adam Smith had already described that where wages are low the price of labour is high. By this he meant that low wages lead to low productivity, so a lot of labour is used for the production of any given quantity of commodities. If wages are high, or, where as happened with the constraint imposed by the Ten Hours Act, and Factory Acts, capital is forced to revolutionise technology, so as to overcome these constraints. The consequent rise in productivity means that in the short term, a relative surplus population is created, causing wages to fall. Wages and living standards may be higher, in the longer term, but the value of labour contained in each commodity unit is lower.
So, contrary to the argument Trump et al put forward, the consequence of reducing immigration will not be to reduce the supply of labour and so cause wages to rise, but be to cause capital to introduce new labour saving technologies that create a relative surplus population and cause wages to fall. Jobs will not return to US mining and steel making, because already the main cause of job losses in those industries is not cheap foreign labour, but is the fact that technology is replacing labour in those industries, and new forms of energy, and of materials is replacing them within the US economy. The same is true in Europe.
Moreover, because immigrants do not just supply labour, but also provide demand for houses, cars, food, clothes and other commodities, the absence of those immigrants leads to a fall in aggregate demand, causing a further fall in the demand for labour-power. It's not foreign workers either as immigrants or as producers of imported commodities that are the cause of job losses in many industries, but the onward march of technology that since the 1980's has both revolutionised productivity and displaced labour, whilst simultaneously raising the rate of surplus value and profit, and in the process created vast new industries that in turn have increased the demand for new types of labour-power.
But, the immigration argument put forward by the right-wing nationalists and populists is facile for another reason. If capital cannot get the labour-power it requires, and cannot overcome that problem quickly via technological solutions, it always has other options. If Californian fruit and vegetable growers cannot obtain Mexican field workers, they can always move their capital and production to Mexico, where those workers are available, and the same applies to Lincolnshire growers and packers, who can simply move their capital to Eastern Europe, with a consequent hit to the Lincolnshire economy.
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